A soft landing for Canada is becoming a “distant prospect”
The likelihood of the Bank of Canada’s desired “Goldilocks” outcome of a soft landing for Canada’s economy is growing dimmer, according to a new report from RBC.
The report is based on recent research from BIS, which suggest “front-loaded” tightening cycles, such as the one being undertaken by the BoC, “tend to be followed more frequently by soft landings.”
But that may not hold true this time, RBC argues.
“With policymakers pledging to do what it takes to rein in inflation, we think a soft landing is becoming a distant prospect,” RBC’s economists wrote. “Central banks are aware of the challenge, but only the BoE has been bold enough to forecast a recession.”
RBC currently expects Canada, the U.S. and the UK to see economic contractions beginning later this year or early next year.
“These declines, while unpleasant, are arguably needed to return supply and demand to better balance and ease inflationary pressure,” they added.
The BIS bulletin, entitled “Hard or soft landing,” explores the difficult job central banks have when it comes to controlling inflation while not sacrificing economic activity, at least no more than necessary.
Read the full article HERE